“Our earnings forecasts remain unchanged, supported by stable growth prospects and a resilient competitive position. We raised our target P/E to 20.9x FY2026 (from 19x) to reflect the premium deserved by Sheng Siong’s superior and sustainable margin profile,” says analyst Chee Zheng Feng.
“In today’s volatile macroeconomic environment, we believe investors will continue to assign a higher valuation to well-managed, stable companies like Sheng Siong,” he adds.
Chee likes the stock for achieving industry-leading margins through a no-frills, disciplined investment approach. Sheng Siong operates with one of the leanest cost structures among grocery retailers globally.
Unlike peers, the company has made minimal investments in marketing, e-commerce platforms and membership programmes. Despite this underinvestment, it continues to remain highly relevant to domestic consumers due to its established brand, strong focus on fresh produce (less exposed to e-commerce disruption or cross-border purchases in JB), and commitment to offering the best value.
The way Chee sees it, the group’s earnings will be supported by network expansion and SG60 voucher boost.
With six new stores opening in FY2024 and ten more in FY2025, this network expansion will drive both revenue and margins over the next two to three years. While new HDB-linked openings remain limited (one in 2026 and three in 2027), the company is exploring private site opportunities and asset acquisitions to expand its footprint.
“Competition from Macrovalue’s entry is not seen as a major threat, given its focus on the premium segment and profitability in the lead-up to an IPO. Sheng Siong should also benefit from the $1.1 billion SG60 supermarket vouchers to be distributed next month, lifting industry-wide demand,” says Chee.
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Another bright spot is that the group’s gross margin expansion is outpacing rising operating costs. New stores typically take 12–18 months to break even, raising investor concerns about the sustainability of operating margins amid rapid expansion.
Sheng Siong has maintained stable margins in 1QFY2025, reflecting good cost control and gross margin improvement through better economies of scale and procurement efficiencies.
As at 3.30pm, shares in Sheng Siong are trading at $2.10.
